Rules forcing all property developments to include cheap housing for the poor
should be relaxed, Grant Shapps, the housing minister, has said.

The minister said Britain already spends "an awful lot of money" on affordable housing and more must be done to kickstart the property rental market.

He said new rental developments without cheap housing are better than no new homes at all. His comments come after a new report from Sir Adrian Montague, a top businessman, warned graduates and young professionals face a shortage of private rented property.

"Even in these austere times, nearly £20bn will have been spent on that particular part of the programme during this parliament, so actually I think the question is what else can we do to get these developments moving," he said.

"If the costs of building are so high that you end up with no development, no regeneration, no community benefits overall, then, actually, you’ve set the bar so high that it’s disadvantageous to everyone."

Sir Adrian's report said the Coalition needs to relax planning rules to tackle a shortage of rental housing for young professionals and help boost the economy.

It urges the Coalition to help property developers to build flats for private tenants, such as graduates and young families struggling to get on the housing ladder.

In a review of the rental market, the top businessman suggests asking councils to give developers of rented homes special treatment in the planning system.

He will float the idea of scrapping targets dictating how much housing is “affordable” in new developments of “build-to-let” homes.

The report will also suggest private landlords could get a quota of public land when the Coalition sells off billions of pounds worth of property to developers.

It says the Government could even offer financial incentives for large-scale housing projects for private tenants, including making the taxpayer share some of the risk.

Sir Adrian's report was last night endorsed as a policy "blueprint" by Grant Shapps, the housing minister.

It comes as George Osborne, the Chancellor, prepares to unveil a major housebuilding programme this autumn.

Gavin Smart, a policy director at the Chartered Institute of Housing, said the recommendations must be taken seriously to help kick-start the economy again.

“Allowing reduced planning obligations for private rented schemes is a radical step and not without risks, but we need to consider radical approaches at a time when new house building is at record lows,” he said.

David Orr, chief executive of the National Housing Federation chief executive, also said Sir Adrian’s suggestions are “a crucial part of the solution to help tackle the country’s desperate housing shortage”.

But Shelter, the housing charity, criticised it for failing to make any suggestions to help the millions of private tenants currently struggling with record high rents.

The demand for private rented homes has almost doubled to 3.6 million over the last 30 years and is expected to grow even further. However, the supply of properties for rent is failing to keep up with demand.